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PETITIONER: RAMACHANDER SHIV NARAYAN

       Vs.

RESPONDENT: COMMISSIONER OF INCOME TAX,ANDHRA PRADESH, HYDERABAD

DATE OF JUDGMENT04/11/1977

BENCH: UNTWALIA, N.L. BENCH: UNTWALIA, N.L. DESAI, D.A.

CITATION:  1978 AIR  278

ACT: Allowable  loss-Loss  of  property  or  money  by  theft  or dacoity, whether a trading loss and if permissible deduction in computation of his net income-Income-Tax Act, 1922,  sec. 10(2)(xv)=s. 37 of Income Tax Act, 1961.

HEADNOTE: The  appellant,  assessee is a registered firm  carrying  on business  in  gold, silver and gunnies at  Rajahmundry.   It also   derives   income  from   investment   in   Government securities.  The assessee, during the assessment year  1964- 65  corresponding  to accounting year ended on  October  16, 1963 returned. a loss of Rs. 5008/- from the business.   The said  figure  was arrived at after claiming a  loss  of  Rs. 30,000/‘  on account of theft.  The assessee had borrowed  a sum of Rs. 50,0001- from some creditor The money was brought in  cash  by  its  employee.  Out of the  said  sum  of  Rs. 50,0001-   which  was  meant  for  purchase  of   Government securities,  a  sum  of  Rs.  30,000/-  was  lost  by  theft committed  by a stranger.  The assessee, therefore,  claimed the  sum  of  Rs. 30,000/- lost by theft  as  a  permissible deduction  in  computation of his net income on  the  ground that it was a trading loss.  The Income Tax Officer rejected the  claim treating, the loss as being either of idle  money or a capital loss and holding that it was not incidental  to the  business of the assessee.  An appeal before the  Income Tax Appellate Commissioner failed; but in further appeal the Tribunal  held that the loss was allowable being  incidental to  the  carrying  on the business of the  assessee.   On  a reference made at the instance of the Commissioner of Income Tax, the High Court of Andhra Pradesh answered it in  favour of Revenue and against the assessee. Allowing the appeal by special leave. the Court. HELD  :  (1)  The  line  of  distinction  as  to  whether  a particular loss is a trading loss or a capital loss is  very subtle  and thin.  In terms no specific. provision is to  be found  in either of the two Acts (Income Tax Act of 1922  or 1961)  for allowing deduction of a trading loss of  cash  by theft.   A trading loss not being a capital loss has got  to be taken into account while arriving at the true figures  of the  assessee’s income in the commercial sense. [803 in  804 C] (2)The list of permissible deduction in either of the  two

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Acts is not exhaustive.  The relevant words, in s. 10(2)(xv) of  the  1922  Act corresponding to s. 37 of  the  1961  Act namely,  "any expenditure.......... not being in the  nature of capital expenditure, or personal expenses of the assessee laid out or expended wholly and exclusively for the  purpose of such business...... has not been able to take within  its ambit loss of property or money by theft or dacoity as it is not an expenditure which has an element of volition, but the forced loss. Such  a  loss  is  a  trading  loss  in   the commercial sense and has got to be takeninto    account for ascertainment of true taxable profit,,,,. [804 C-E] BadridasDaga  v. Commissioner of Income-Tax, 34 I.T.R.  10 and Commissioner ofIncome-tax U.P. v. Nainital Bank Ltd. 55 I.T.R. 707, followed. Motipur   Sugar Factory Ltd. v. Commissioner of  Income-Tax, Bihar & Orrissa 28 I.T.R. 128, approved. Charles   Moore   &  Co.  (W.A.)  Ply.   Ltd.   v.   Federal Commissioner of Taxation (1956-57) Commonwealth Law  Reports 344  and Gold Bank Services Ltd. v. Commissioner  of  Inland Revenue  (1961)  New Zealand Law Reports, 467,  quoted  with approval. 802 (3)If  there is a direct and proximate nexus  between  the business operation, and the loss or it is incidental to  it, then  the  loss  is  deductible,  as  without  the  business operation and doing all that is incidental to it, no  profit can  be earned.  It is in that sense that from a  commercial standard  such a loss is considered to be a trading one  and becomes deductible from the total income although, in  terms neither  in  the  1922 Act nor in the 1961 Act  there  is  a provision like section 51(1) of the Australian Act. [806  G- H] Basantlal  Sanwar  Prasad v. Commissioner of  Income-Tax  67 I.T.R.  380 (Patna); U.P. Vanaspati Agency v.   Commissioner of Income-tax 68 I.T.R. 120; Commissioner of Income Tax U.P. v. Sarya Sugar Mills (P) Ltd. 70 I.T.R. 109; Commissioner of Income-Tax,  Madras v. K. T.  M. S. Mahmood 74  I.T.R.  100; Commr. of Income-Tax, M.P. v. Ganesh Rice Mill 77 I.T.R. 889 and  Chhotulal  Ajitsingh  v.  Commissioner  of  Income-Tax, Rajasthan 89, I.T.R. 178, referred to, Bansidhar Onkarmal v. Commissioner of Income-Tax, Bihar  and Orissa  17 I.T.R. 247 ’(Orissa ); M/s.  Ram Gopal Ram  Sarup v.  Commissioner  of  Income-tax,  Punjab  47  1.T.R.   611; Commissioner  of  Income  Tax,  Andhra  Pradesh  v.   Chakka Narayana 43 I.T.R. 249; Madurai Rajeshwar v. Commissioner of Income-tax,  Andhra  Pradesh,  51 I.T.R. 213 and  S.  P.  S. Ramaswami  Chettiar & Or.s. v. The Commissioner  of  Income- Tax, Madras I.L.R. 53, Madras 904, disapproved. A direct and proximate connection and nexus must be  between the  business operation and the loss.  A businessman has  to keep  money either when be gets it as sale proceeds  of  the stock-in-trade  or  for disbursement to  meet  the  business expenses  or for purchasing stock-in-trade and if  he  loses such  money  in the ordinary course of business  such  is  a deductible trading loss.  It is immaterial whether the money is a part of the stock-in-trade such as a banking company or a  money  lender  or is directly connected  with  the  other business.   The risk is inherent in the carrying on  of  the business  and  is  either  directly  connected  with  it  or incidental to it. In  the instant case, the High Court took an erroneous  view in  giving  an answer against the assessee.  The  loss  was, however, directly connected with business operation and  was incidental to the carrying on of the business of purchase of Government securities to earn profits.  In such a  situation

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it was a part of the trading loss and deductible as such  in arriving at the true profit-, of the assessee. [808 B-C,  E- G]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  1611  of 1972, Appeal by Special Leave from the Judgment and Order dated 4- 3  1974 of the Andhra Pradesh High Court in  Case  Reference No. 28 of 1969. Jitendra Sharma for the Appellant. K.   C. Dua and R. N. Sachthey for the Respondent. The Judgment of the Court was delivered by UNTWALIA  J.--This is an assesee’s appeal by  special  leave from  the  decision of the Andhra Pradesh High  Court  in  a reference  made  by  the  Income  Tax  Appellate   Tribunal, Hyderabad Bench under section 256(1) of the Income Tax  Act, 1961-hereinafter referred to as the 1961 Act.  The  question referred  for the opinion of the High Court at the  instance of the Revenue was in the following terms               "Whether,   on   the   facts   and   in    the               circumstances  of the case, the  assessee  was               entitled  to the allowance of the loss of  Rs.               30,000 ?" 803 The  facts of the case as found by the Tribunal are  in  a very  narrow  (,compass.   Their  correctness  was   neither challenged nor could it be ,challenged in the High Court  on any legal grounds, such as, that the findings were  vitiated as being perverse, wholly unreasonable or unsupported by any evidence.  No reference to challenge the correctness of  the facts  was either asked for or made.  The High  Court  has. therefore,  rightly proceeded to answer the question on  the facts found, by the Tribunal. The  assessee is a registered firm carrying on  business  in gold,  silver, and gunnies at Rajahmundry.  It also  derives income  from  investment  in  Government  securities.    The assessment  year in question is 1964-65.  The  corresponding accounting year ended on October 16, 1963.  The assessee had sold some Government securities and bonds in the years  both preceding  and succeeding the accounting year  concerned  in the  present appeal.  Income-tax was levied on  such  income also.  For the assessment year 1964-65 it returned a loss of Rs. 5,008/- from the business.  The said figure was  arrived at  after claiming a loss of Rs. 30,000/on account of  theft committed   by  some  stranger  during   the   corresponding accounting period.  A sum of Rs. 50,0001- for the purpose of purchasing  Government  securities was brought  in  cash  to Rajahmundry  by its employee.  The money was handed over  to its  cashier.  When the cashier turned his back to take  out some  books,  a stranger suddenly arrived at  the  place  of assessee’s business and committed the theft of 30,000/-.  In spite of the lodging of a report with the police, no  amount could  be, recovered.  The assessee claimed the sum  of  Rs. 30,000/lost   by  theft  as  a  permissible   deduction   in computation  of his net income on the ground that it  was  a trading  loss.   The Income Tax Officer rejected  the  claim treating the loss as being either of idle money or a capital loss. According  to  him it was not  incidental  to  the business of the assessee. Its  appeal before the  Income Tax Appellate Commissioner failed butthe         assessee succeeded in the further appeal taken to the Tribunal.   The loss was allowed on the ground that it was incidental to the

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carrying   on  of  the  business  of  the   assessee.    The Commissioner  of Income Tax asked for a reference which  was made on the question ,of law above mentioned. Many cases of this kind involving almost identical questions on  facts  somewhat  similar or varying  have  come  up  for consideration before the Courts in England and varying other countries and the various High Courts in India.  The line of distinction  as  to whether a particular loss is  a  trading loss  or a capital loss has sometimes been very  subtle  and thin  resulting in expression of different opinions  by  the different High Courts almost on identical or similar  facts. The  leading  decision  of this Court is.  in  the  case  of Badridas  Daga  v.  Commissioner  of  Income  Tax(1).    The principle  decided in that case was reiterated with  greater force, if we may say so with respect, in another decision of this  Court in Commissioner of income-Tax, U.P. v.  Nainital Bank  Ltd(2) After the said two decisions most of the-  High Courts  have applied, as they were bound to, the  principles enunciated in them in favour of the assessees under  similar circumstances  and facts.  But we shall presently show  that the Andhra (1) 34 I.T.R. 10          (2) 55 I.T.R. 707 804 Pradesh  High  Court persisted and has done so even  in  the judgment  under appeal in taking ,rather, a narrow  view  of the matter and not correctly applying the ratio decidendi of Badridas Daga’s and Nainital Bank’s cases, Under section 10(1) of the Income Tax Act,  1922-hereinafter called the 1922 Act, the assesses was required to pay tax in respect  of the profits or gains of any business carried  on by him-.  The corresponding provision in the 1961 Act is  to be  found in section 28.  Sub-section (2) of section  10  of the  1922  Act  prescribed the  method  for  computation  of profits  or gains after making the allowances enumerated  in the various clauses of that sub-section.  The  corresponding section 29 of the 1961 Act says : "The income referred to in section  28  shall  be  computed  in  accordance  with   the provisions  contained in sections 30 to 43-A." In  terms  no specific provision is to be found in either of the two  Acts for allowing deduction of a trading loss of the kind we  are concerned with  in this case. But    it    has     been uninformally  laid  down that a trading loss   not  being  a capital loss has got to be taken into account while arriving at  the  true  figures  of  the  assessee’s  income  in  the commercial  sense.   The list of permissible  deductions  in either of the Acts is not exhaustive.  We may just refer  to section 10(2) (xv) of the 1922 Act corresponding to  section 37  of  the  1961  Act.  The  relevant  words  of  the  said provision namely "any expenditure not being in the nature of capital  expenditure  or personal expenses of  the  assessee laid out or expended wholly and exclusively for the  purpose of  such business......... I occurring in either of the  two provisions  has not been able to take within its ambit  loss of  property  or money by theft or dacoity as it is  not  an expenditure  which has an element of volition, but a  forced loss.   The  cases  have laid down that such  a  loss  is  a trading loss in the commercial sense and has got to be taken into account for ascertainment of true taxable profits. Now we proceed to refer to some decisions of the High Courts and this Court.  We may start with a Patna decision reported in  Motipur Sugar Factory, Ltd. v. Commissioner  of  Income- Tax, Bihar and Orissa(1).  The assesses company carrying  on business  in  the manufacture of sugar and molasses  out  of sugarcane  deputed  an  employee,  in  compliance  with  the statutory  rules,  with cash for distribution  to  sugarcane

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cultivators at the spot of purchase.  The cash was robbed on the way.  The High Court took the view that the loss was one arising out of the business of the assessee and sprang  from the  statutory  necessity  of  ,sending  money  to   various purchasing centres for distribution and hence was deductible from the assessee’s taxable income.  The stress by the  High Court  that sending of money to various  purchasing  centres sprang  from  the  statutory  necessity  was  not  of   much consequence.   The  method of business  operation  springing from custom, trade usage or practice or otherwisemay   make the assessee send cash to or bring cash from other places. The Patna,  decision has been approved in the decisions of  this Courtin Badridas Daga’s and Nainital Banks cases. (1)28 I.T.R. 128. 805 In  Badridas Daga’s case an agent of the  assessee  withdrew from the firms bank account large sums of money and  applied them  in  satisfaction  of his personal  debts  incurred  in speculative  transactions.  A part of it was recovered  from him but the balance of Rs. 2,00,000/and odd was written  off at  the  end of the accounting year as  irrecoverable.   The question for consideration was whether the amount  embezzled by the assessee’s agent was to be deducted in computation of the assessees profits.  Venkatarama Tiyar J. delivering  the judgment of the Court has said at page 15 of 34 I.T.R.               "The result is that when a claim is made for a               deduction  for  which  there  is  no  specific               provision  in  section 10(2),  whether  it  is               admissible  or  not will  depend  on  whether,               having regard to accepted commercial  practice               and  trading  principles, it can  be  said  to               arise  out of the carrying on of the  business               and  to  be  incidental to  it.   If  that  is               established,   then  the  deduction  must   be               allowed,  provided  of  course  there  is   no               prohibition    against    it,    express    or               implied........ The    learned    Judge    emphasised   at    page    1    6 that  the  loss for which a deduction could  be  made  under section  10(1)  must be one that springs directly  from  the carrying on of the business and is incidental to it and  not any  loss  sustained by the assessee, even if  it  has  some connection with his business." An example of theft committed by a thief by breaking overnight the premises of the  money- lender  and  running  with the funds was given  to  show  in Daga’s case that it would not be an allowable loss.  But the example was not considered to be quite appellate in the case of Nainital Bank for taking the opposite view.  The majority opinion of a special Bench of the Madras High Court in S. P. S. Ramaswami Chettiar & Ors. v. The Commissioner of  Income- Tax, Madras,(1) were merely referred in Badridas Daga’s case but was disapproved in Nainital Bank’s case. The  facts of the latter case were that the Bank in the usual course of itsbusiness had to keep cash money in various safes in its various  branches.  At one of its branches the  cash  amount of  Rs. 1,00,000/ and odd was stolen in a dacoity  committed at about 7.00 p.m. Subba Rao J., as he then was,  dismissing the  department’s appeal held the loss to be  an  admissible deduction  chiefly on the ground that it formed part of  the stock-in-trade  of  a banking company.  A  large  number  of authorities  were considered including the one  in  Badridas Dagds  case.   A  distinction drawn in  some  of  the  cases between  misappropriation  of  the assessee’s  money  by  a’ servant  or loss to him by reason of cash being robbed  from its  servant  was  held to be of no  consequence.   In  that

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regard referring to the decision of the Madras High Court in Ramaswami  Chettiar’s case it was held that the  correctness of the said decision was shaken when this Court in  Badridas Daga’s  Case  approved  the  Patna  view  in  Motipur  Sugar Factory’s   case.    The   minority   view   expressed    by Anantakrishna  Ayyar J. was preferred.  The decision of  the High  Court of Australia in Charles Moore & Co.  (W.A.)  Pty Ltd.  v.  Federal Commissioner of  Taxation(2)  was  heavily relied upon. (1)  I.L.R. 53, Mad. 904. (2)  (1955-57) 95 Commonwealth Law Reports, 344. 806 Reference was also made to the decision of a learned  single Judge  of the New Zealand Supreme Court in the case of  Gold Bank  Services Limited v. Commissioner of Inland Revenu  (1) which  had  followed  the  Australian  decision  in  Charles Moore’s case.         The case of Nainital Bank was held  to be  stronger than the two foreign decisions aforesaid.    We may  however, point out the slight distinction  between  the Income-tax  law  of Australia and New Zealand  and  that  of India, although basically                 in principle there is hardly any difference.        In the Australian case  the v.  Commissioner of Inland Revenue() which had followed  the Austra v. Commissioner   of  Inland  Revenue()   which   had followed the Austra v.   Commissioner  of  Inland  Revenue() which had followed the Austra statutory language ofsection 51(1)  of  the Income Tax and Social  Services  Contribution assessment  Act 1936-1952 fell for consideration.   The relevant words of the,said   provision  were  :   "losses necessarily incurred in gaining or producing the  assessable income."  In  our Acts there is no  such  express  provision because   the   corresponding  provision   used   the   term ’expenditure’ and not losses.  But the principle decided  by the full Court of the, High Court of Australia (the  highest Court  in  the  land) is aptly  applicable  in  India.   The argument  for  the Commissioner that before  the  money  was stolen it had come home to the tax-payer so as to form  part of  the  capital resources was rejected at page 351  on  the ground               "......  we  are  here  dealing  with  a  loss               incurred in an operation of business concerned               with the regular inflow of revenue, not with a               loss  of  or concerning part  of  the  "profit               yielding  subject," the phrase in  which  Lord               Blackburn in United Collieries Ltd. v.  Inland               Revenue  Commissioners-(1930) S.C. 215. at  p.               220;  (1929)  12  Tax as.  1248,  at  p.  1254               summarised  the characteristics of a  business               undertaking  or  enterprise considered  as  an               affair of a capital nature." The language of the New Zealand statute was more or less the same  except  that it contained  the  adverb  "exclusively". Haslam  J.,  therefore,  stated at page 470  of  (1961)  New Zealand Law Reports :-               "While  our  section contains  the  adverb   "               exclusively",   which  is  absent   from   its               Austrailan counterpart, I do not think that on               the  instant facts this difference in  wording               can affect the conclusion.  In my opinion, the               loss  was exclusively incurred in  the  manner               described, since the risk of precisely such an               event  was  inherent  in  the  course  of  the               production of assessable income." The principle applicable in India is more or less the  same. If  there  is  a  direct and  proximate  nexus  between  the

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business  operation and the loss or it is incidental to  it, then  the  loss  is deductible,  as,  without  the  business operation and doing all that is incidental to it, no  profit can  be earned.  It is in that sense that from a  commercial standard  such a loss is considered to be a trading one  and becomes deductible from the total income, although, in terms neither  in  the  1922 Act nor in the 1961 Act  there  is  a provision like section 51 (1) of the Australian Act. There is a veritable roll-call of cases of the various  High Courts in India, mostly under similar circumstances,  taking the  view on the lines of Daga’s and Nainital Bank’s  cases. We may just refer to some of (1)  (1961) New Zealand Law Reports, 467. 807 them  In Basentlal Sanwar Prasad v. Commissioner of  Income- Tax(1) the loss of cash in a burglary committed at night  in a  wholesale cloth shop was held to be allowable.   In  U.P. Vanaspati   Agency   v.   Commissioner   of    Income-Tax(2) (Allahabad)  money  entrusted  to  an  employee  for   being deposited  in  the Bank but lost in the way by  robbery  was held  to  be, deductible.  To the same effect  is  the  view expressed   by   Allahabad  High  Court  in  the   case   of Commissioner  of Income-Tax, U.P. v. Sarya Sugar  Mills  (P) Ltd.(3); by the Madras High Court in Commissioner of Income- Tax, Madras v. K. T. M. S. Mahmood(4); by the Madhya Pradesh High Court in Commissioner of Income-Tax M.P. v. Ganesh Rice Mills(5) and the Rajasthan High Court in Chottulal  Ajitsing v.  Commissioner of Income_Tax, Rajasthan.(6)  The  contrary view  expressed  in  the  case  of  Bansidhar  Onkermal   v. Commissioner  of Income-Tax, Bihar and Orissa(7) and in  the Madras full Bench ,case of Chettiar’s is no longer good law. The  ratio  of  Daga’s  case does  not  seem  to  have  been correctly  applied by the Punjab High Court in Mesars.   Ram Gopal Ram Sarup v. Commissioner of Income-Tax, Punjab(8). Now   we  proceed  to  point  out  the  persistently   wrong application of the law laid down by this Court by the Andhra Pradesh High Court in two earlier decisions followed in  the decision  under  appeal also.  They are  :  Commissioner  of Income-Tax, Andhra Pradesh v. Chakka Narayana(9) and  Maduri Rajeshwar  v.  Commissioner of  Income-Tax,  Andhra  Pradesh (10).   In Chakka Narayana’s case (supra) the  assessee  who was  a  dealer in cloth and government  securities  encashed government  securities worth about Rs. 20,000.  He  went  to the Madras Railway Station for taking the cash to his  place of  business  but  lost  the  money  on  account  of   theft committed.  The High Court referred to Badridas Daga’s  case but  yet  distinguished  it  and  preferred  to  follow  the majority decision of the Full Bench of the Madras High Court in  Ramaswami  Chettiar’s  case which, as  we  have  already pointed  out,  was not approved by this  Court  in  Nainital Bank’s  case. the High Court enunciated the  law  correctly, but committed an error in applying the same to the facts  of that case when it said : "It could not be posted that it was absolutely  necessary  for the assessee to cash  the  cheque issued  and  to carry the money on his person.  It  is  only when it could be posited that it was part of his business to take money with him that it could be said that the loss  was incidental to his business."We  do  not  approve  of  this distinction.               Similarly the Andhra PradeshHigh Court  took a narrow view in Maduri Rajeshwar’s  case  also. There a stranger came to the assessee’s shop during business hours  and, when the assessee had gone into another room  to talk on the telephone, the stranger removed the cash box and disappeared.   Chandra  Reddy  C.J. who  had  delivered  the leading  judgment in the earlier case as also in this  case,

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if we may point out with respect, committed the same mistake when he said at page 216 : (1) 67 I.T. R 380 (Patna).    (6) 89 I.T.R. 178 (2) 68. I.T.R, 120. (7) 17 I.T.R. 247 (Orissa). (3) 70 I.T R. 109.  (8) 47 I.T.R. 61 1. (4) 74 T.T R. 100.  (9) 43 I.T.R. 249. (5) 77 I.T.R. 889.  (10) 51 I.T.R. 213. 808               "It   cannot  be  postulated  that  the   loss               sustained  by the assesee resulting  from  the               theft  committed  by  the  stranger-   springs               directly from his business or is incidental to               the  carrying  on of it. The  only  connection               that  could  be established in this-  case  is               that at the time theft was committed money was               in  the  business premises and it  was  during               business hours.  There is no other  connection               between  the theft of the money and the  busi-               ness of the assessee." It  is  to  be  remembered that  the  direct  and  proximate connection and nexus must be between the business  operation and the loss.  It goes without saying that a businessman has to keep money either when he gets it as sale-proceeds of the stock-in-trade,  or  for disbursement to meet  the  business expenses  or for purchasing stock-in-trade and if  he  loses such money in the ordinary course of business, the loss is a deductible trading loss.  It is immaterial whether the money is  a  part  of the stock-intrade, such as,,  of  a  banking company or a money-lender, or is directly connected with the other  business  operations.  The risk is  inherent  in  the carrying on of the business and is either directly connected with it or incidental to it. In  the judgment under appeal the High Court, to  our  mind, has  taken  the  same erroneous view and  given  the  answer against  the  assessee  inspite of the,  fact  that  it  has noticed a catena of cases of the various High Courts already alluded to by us also.  Distinguishing the preponderance  of the view expressed in the various decisions in favour of the assessee,  the High Court, in our opinion, wrongly chose  to stick to its earlier narrow view. In  the  light of the conspectus of the  law,  as  discussed above,  let  us  see  whether on  the  facts  found  by  the Tribunal:  the  loss  of Rs. 30,000/-  was  allowable  as  a trading  loss.   The  assessee had borrowed a  sum  of,  Rs. 50,000/- from some creditor.  The money was brought in  cash to  Rajahmundry  by its employee.  Such a mode  of  business operation  is very common and well-known.  Out of  the  said sum of Rs. 50,0001which was meant for purchase of Government securities  a sum of Rs. 30,000/- was lost by theft.  It  is immaterial  whether Government securities were purchased  by the  remaining  sum of Rs. 20,000/- or not.  The  loss  was, however, directly connected with the business operation  and was  incidental  to  the  carrying on  of  the  business  of purchase of Government securities to earn profit.  In such a situation  it was a part of the trading loss and  deductible as such in arriving at the true profits of the assessee. In the result we allow the appeal,, set aside the,  decision of  the High Court and answer the question in favour of  the assessee  and against the Commissioner of  Income-Tax.   The latter must pay to the appellant the costs in this appeal. S.R.                  Appeal allowed. 809